08 March, 2017
Courtesy of the Australian
Electricity prices are set to continue to spiral upwards because of unintended consequences from the design of the renewable energy target, the nation’s energy tsar has warned.
In a submission to the review of the national electricity market by Chief Scientist Alan Finkel, the Australian Energy Market Commission also suggested that subsidies such as the RET and policy uncertainty could erode investor confidence — threatening the security of power supplies.
Yesterday, AEMC chairman John Pierce said the energy sector had “suffered from a long vacuum around national, co-ordinated policy decisions”.
“This has resulted in pervasive uncertainty which makes it difficult for business and consumers to invest — and undermines the reliability of power supply,” Mr Pierce said.
The commission also called for emissions reductions and energy policy to be properly integrated, pointing to Britain as a “cautionary tale” where customers were slugged with price hikes as climate change policy was at odds with energy policy.
“If environmental policy is not effectively integrated with energy policy the NEM might reach a point where participants do not have the confidence to make investment decisions in response to price signals,” the submission says.
“This is likely to result in a scenario where government intervention is always required, along with the consequent transfer of risks on to consumers and likelihood of higher costs.”
The warning comes as research to be released today finds that intermittent wind and solar technologies are imposing “hidden” costs on the power system, including the need to maintain back-up generation.
“These costs increase significantly as the share of intermittent generation capacity in a power system rises,” says the paper by BAEconomics, commissioned by the Minerals Council of Australia and sent to the Finkel review.
These costs come on top of the $1.8 billion that households and businesses paid in direct subsidies for the large-scale component of the RET last year alone, which will rise this year, the research finds. The subsidies “only represent a fraction of the costs” of the RET policy, the paper says.
The bosses of two of Australia’s biggest energy producers, Origin Energy and AGL Energy, yesterday also backed calls for an emissions intensity scheme, adding to pressure on the Turnbull government to overturn its stance against such a scheme.
Origin chief executive Frank Calabria said that it would have a relatively low impact on electricity prices and competitiveness. Mr Calabria said changes should be made to the national electricity market so it could cope with the “variability” from renewable energy while ensuring there was enough coal and gas power available in each state at all times.
AGL chief Andy Vesey tweeted his support for an emissions intensity scheme. Dr Finkel’s review is being conducted as renewables are increasing and coal-fired power plants are being closed.
The AEMC submission says the exit of existing generators has had unintended impacts, including increasing wholesale prices.